In August 2016, the Financial Stability Board (FSB) published a discussion note on essential aspects of central counterparty (CCP) resolution and planning.

The FSB has now published a consultative document on draft guidance on central counterparty resolution and resolution planning, which was based on the responses received on the discussion note. The guidance covers a number of aspects which authorities should consider when developing frameworks for resolving failing CCPs, including:

  • policy objectives for CCP resolution to maintain financial stability;
  • the powers that resolution authorities should have to maintain the continuity of critical CCP functions, return the CCP to a matched book and address default and non-default losses, including potential indicators for considering when a CCP should enter resolution;
  • use of loss allocation tools in resolution and provisions necessary to protect creditor rights so that the triggering of resolution by authorities does not leave creditors worse off than if the authorities had not stepped in; and
  • steps authorities should take to establish crisis management groups for CCPs that are systemically important in more than one jurisdiction, develop resolution plans and conduct resolvability assessments.

The FSB will undertake further work on financial resources for CCP resolution and, based on further analysis and experience gained in resolution planning, will determine by end-2018 whether it should develop further guidance on this issue.

View FSB consults on draft guidance for CCP resolution and resolution planning, 1 February 2017

Leave a Reply

Your email address will not be published. Required fields are marked *